No easy path for the World Bank's safeguards

A protester holds up a World Bank logo during a demonstration against the latest safeguard framework policies. Photo by: CIEL / Accountability Project / CC BY 

World Bank President Jim Yong Kim is quick to admit it — the ongoing revision of the bank’s safeguards policy has turned out to be a tough one.

“Let me just give you an example of how complex this is,” Kim said Monday at an event hosted by the Council on Foreign Relations in Washington, D.C., as he wound up to answer a question from the audience about the bank’s protections of indigenous peoples affected by its projects.

“Communities from Latin America are absolutely convinced that even stronger language on indigenous communities is important,” he explained. “Countries in Africa are saying, ‘Are you kidding me?’ when we begin to ask questions of indigenous people. We had problems like the one we had in Rwanda, where ‘indigenousness,’ if you will, is extremely complicated and difficult.”

Kim may have been referring to a section in a recent safeguards draft that suggests governments which can prove that acknowledging indigenous peoples would exacerbate “ethnic tension or civil strife” can request an “alternative approach” when implementing a bank-financed project.

Such an “alternative approach” would have to be structured so that project-affected indigenous communities will be treated “at least as well as other project-affected people”; more details would be laid out in each project’s environmental and social commitment plan.

It’s only one of a slew of issues raised around the bank’s safeguards policy, which is scheduled for board consideration next year. But the fact that conflicts involving indigenous peoples can come with civil strife or ethnic tension — recent clashes involving the Rohingya in Myanmar’s Rakhine state come to mind — isn’t lost on the World Bank chief.

“I don’t know how we’re going to bring extremely strong opinions that come from different parts of the world with different frames together. But that’s the job not just of me but of the board,” Kim said. “So this is why multilateralism is so extremely difficult, because you have powerful forces on our board that are arguing about these things all the time.”

The debate about the safeguards reaches way beyond the bank’s board rooms. On a recent fall morning, representatives from NGOs, advocacy groups and environmental watchdogs from around the world — still wearing lanyards from the World Bank annual meetings just a few streets away — met in secret in a windowless conference room, only blocks away from the bank’s headquarters.

A microphone traveled along a boardroom table while translators struggled to keep up with rapid-fire suggestions for protest tactics. The goal was to create an act worthy of their collective anger, and to get the attention of the the biggest development finance institution on the planet.

“When we walk out of the meeting on Saturday,” began one speaker, a representative from the German environmental and human rights advocacy group Urgewald, “I think we should first give a signal — maybe after someone from the bank speaks — and then someone can read out our statement. How does that sound?”

The walkout took place Saturday, Oct. 11 — the last day of the annual meetings — and it has inspired at least one walkout and several demonstrations on the fringes of the more than 40 consultations that have taken place since the annual meetings.

Bank officials knew about the walkout before it happened, according to a spokesperson. But to some advocates like Korinna Horta, also of Urgewald, some of the panelists in DC appeared as if they “could not believe what they were seeing.”

During a long-awaited consultation with civil society on the bank’s draft updates of its safeguards, the policies meant to protect people and the environment from the potential damage of bank-supported projects, two dozen activists stood and peeled off their jackets and blazers to reveal matching black t-shirts printed with the slogan, “Safeguard people & the planet and not corporate profits & human rights abuses.” A spokesman moved to the front of the room and read a statement.

“We, the hundreds of peoples movements and organizations present here from around the world and the many thousands back in our countries are rejecting this current draft of the safeguards,” the statement read. “The protections you now seek to dismantle, the safeguards that we fought for over decades, do not belong to you, they are not yours to throw away. They belong to the world and its vulnerable people.”

Representatives from two dozen social and environmental advocacy groups then filed silently out of the room.

The bank officials — Stefan Koeberle, director of operational policies for country services, Marl King, chief officer of environmental and social standards, and Sumir Lal, manager of operational communications — were left with only about 20 participants.

“Let’s continue,” is what Horta remembers them saying.

But by then, a majority of the meeting participants had left.

No World Bank issue has drawn more attention from the international development community lately than the ongoing revision of safeguards. The draft leaked in July suggests that the multilateral institution wants to shift from somewhat outdated, yet legally binding rules to a more socially and environmentally sensitive, albeit conditional set of goals.

The approach has been termed “aspirational” because it is meant to advance development opportunities for all while giving countries more flexibility to shape their own environmental and social progress. It may allow the bank to cut red tape in order to speed up the lending process — one of Kim’s declared goals — and stay competitive with newer, well-endowed development banks.

The bank does list its expectations for borrowers. For instance, governments and contractors would have to consult with marginalized groups about the potential impacts of a planned project and provide “protections” for pastoralists and peoples living in voluntary isolation.

But many social and environmental advocates worry that the bank’s amended safeguards will be too vaguely worded to act as a true yardstick, and think the emerging safeguards will leave the environment and local communities vulnerable. They fear the bank, member countries and partners won’t be held accountable for violations, or will conduct vague impact assessments in preparation for projects.

Bank officials, however, claim that all existing remedy and grievance mechanisms would remain.

A key difference in the revamped safeguards leaked in July, which are expected to be finalized next year, is that they would allow countries to manage some risks as they arise, rather than before a project begins.The bank has pointed out that it allows countries to manage risks only if local standards are considered up to par. Where a country falls short, the bank would step in and customize its own safeguards to make up the difference.

That may give the World Bank more flexibility to expand access to finance especially for lower-income and post-conflict states in need of incentives to upgrade their own social and environmental standards.

The July draft also tweaks the bank’s “front-end” requirements, which, among other things, stipulate that borrowers submit a comprehensive resettlement plan for indigenous communities before the bank commits to financing a project. Under the new proposal, borrowers would still be obligated to submit alternate resettlement plans. But critics fear that such a requirement could be exploited.

Another gray area exists when it comes to indigenous peoples. Under the draft revision, if borrowing governments expressed concern that identifying indigenous groups could exacerbate “ethnic tension or civil strife,” or if acknowledging those groups seemed “inconsistent” with a country’s constitution, government officials would be allowed to request an “alternative approach.” Yet the type of alternative, or degree that a solution is considered “alternative,” isn’t specified in the draft revision.

A statement on the bank’s website insists the condition would only be used “in exceptional circumstances” and would include “consultations with the affected indigenous peoples.”

Many human rights advocates fear that such vagueries will turn back the clock on the bank’s past successes and its growing focus on inclusive growth. They note that even while earning a reputation as the most inclusive multilateral development bank, the bank’s safeguards have proven difficult to enforce. 

World vs. bank

The broad, sunny sidewalk and adjacent park in front of the World Bank’s headquarters make for a great picket line. After the walkout in October, protesters joined a growing, mismatched crowd of annual meeting participants and sheepish bank employees hoisting signs and dolls modeled after the the World Bank president, complete with papier-mache Pinocchio noses. Fittingly, the Pinocchio Jim dolls were inherited from a safeguards protest earlier in the summer.

Pinocchio Jim has since made numerous worldwide appearances. Advocates for indigenous peoples, gays and lesbians and the environment have staged demonstrations in Manila and Brussels in the past few weeks. Their message was much the same: The bank’s draft safeguard policies would unravel decades of social and environmentally minded programming.

The walkouts in Brussels and Manila were staged during consultations the World Bank had scheduled there with civil society. These meetings — part of phase II in the bank’s safeguards revision process — will continue until early 2015, when a safeguards review team will present a new draft to the board of executive directors. Until then, the safeguards will be on tour while a shifting group of activists and protesters gather just a few steps ahead.

Spending time with the NGOs, research groups and watchdogs involved in the safeguards debate, the word one hears again and again is “dilution.”

The safeguards will include, for the first time, language protecting lesbian, gay, bisexual, transgendered and intersex individuals, and will expand protections of indigenous peoples and those vulnerable to exploited labor. But many advocates claim that simply mentioning these stakeholders isn’t enough; as long as the language remains vague and lacks legal restrictions, the bank won’t be able to enforce the standards.

“The [safeguards] lack specific language, they allow for interpretation on the level of the government or the implementers who might not have any environmental standards and can apply the language as loosely as they want,” said Nezir Sinani, senior environmental consultant at the Bank Information Center.

His worry is that the bank could give advance yet insufficient warning to indigenous peoples to move off the land to make way for a megaproject, and that would still qualify as free, prior and informed consent.

It’s soft phrases like “take into account” and “where applicable” that bother many advocates, who derisively call them “weasel words.”

The bank sees it differently. It isn’t fair, bank officials contend, that new or post-conflict states — the ones most in need of infrastructure, for example — should be ineligible for bank loans because they haven’t yet solidified a stance on human rights or the environment. Placing safeguards as a goal, rather than a prerequisite, could give countries an incentive to speed up social and environmental change. Safeguards should be contextual and tailored to each nation, government and stage of social and environmental progress.

“To say you’re going to use exactly the same standard in South Sudan as in Mongolia, that’s just not the way any regulatory system operates,” said Charles Di Leva, chief counsel of the bank’s Environmental and International Law Unit. “You always look at the circumstances that determine the kind of outcome you’d like to have.”

The language in the safeguards draft provides that flexibility, Di Leva suggested. It was modeled after policies from other regulatory agencies, he added, citing his experience representing the U.S. Environmental Protection Agency while working in the U.S. Department of Justice.

“These types of terms have been used by multilateral development banks and every regulatory agency for years,” he said.

Other multilateral banks seem to be taking a different approach to the World Bank’s, though — at least for now. The Asian Development Bank, which emulates many bank policies, for instance, released a statement in November announcing that its independent evaluation team will not recommend following the World Bank’s lead on safeguards.

“Meeting the safeguards cannot be aspirational or a goal to be considered down the road, but rather a regulation that is legally binding,” Vinod Thomas, ADB’s director-general of independent evaluation, said in an interview with Devex.

Thomas, who used to lead a similar team at the World Bank, the Independent Evaluation Group, added that whether a country is developed or not, legally binding safeguards are necessary because public and private investors who often partner on projects aren’t otherwise bound by the same rules.

Placards used by protesters. Photo by: CIEL / Accountability Project / CC BY 

Partnering with public and private sector players — for example mutual funds, other development banks and private lenders — is becoming the new norm in large-scale development projects. As developing countries achieve middle-income status, domestic and regional institutions tend to become more viable sources of funding.

Many of these other sources, however, have less-than-stellar records when it comes to protecting human rights and the environment. The challenge, according to Nancy Alexander, the Heinrich Böll Foundation’s director of economic governance who closely followed the creation of the bank’s environmental safeguards in the late 1990s, is that these players are more difficult to regulate. Many of the newer, well-funded development banks and private companies are backed by China, for example, whose record in human rights has been a sticking point with many world leaders, including those in the United States, the World Bank’s largest donor.

“Infrastructure partnerships create a lot of risk, particularly because the private sector doesn’t have the same obligations toward transparency and damage inflicted,” Alexander told Devex, “which is why these projects need oversight from the international community.”

Construction of the massive Inga 3 dam in the Democratic Republic of Congo offers a glimpse at the scale and complexity facing investors and developers of hydropower, a growth sector. The Inga 3 dam, which is the first phase of the Grand Inga project, the world’s largest hydropower scheme, is a public-private partnership. Potential investors in Inga 3 alone include the African Development Bank, the World Bank, the French development agency AFD, the European Investment Bank and the Development Bank of Southern Africa, with private sector companies and South Korea, China and Spain as the most likely candidates, according to the environmental nonprofit International Rivers.

IR and other groups worry that, among other risks, the dam will flood the Bundi Valley, disrupting agriculture, the environment and local communities. And as DRC winds down from civil war, corruption and political upheaval over the project are also concerns. The negative environmental and social impact of similar projects are part and parcel the reason the bank backed away from such high-risk projects at the end of the 20th century. But in recent years, the bank reversed its position. For the Inga 3 Dam, the World Bank has pledged to provide the project with technical assistance, but will its involvement, however minimal, still require the slew of invested countries, companies and multilaterals to comply by its safeguards?

Bank vs. bank

The safeguards revision isn’t only meeting resistance in the field. The debate returned to bank headquarters in Washington last month when an employee alleged that he was under internal investigation for leaking the safeguards draft to the public. The alleged leaker, Fabrice Houdart, wrote on an internal blog that the investigation is “only a pretext” for bank leaders piqued about his blowing the whistle recently on the bank’s decision to award a $96,000 bonus to Bertrand Badre, the bank’s chief financial officer who has been tasked with identifying million-dollar budget cuts as part of Kim’s ambitious reforms plans — including job cuts.

Supporters of the bank’s top brass told the Economist anonymously last month that internal unrest can be attributed largely to Houdart, who they characterized as “one disgruntled midlevel officer.” But the suggestion that only one bank employee took issue — in the midst of an institutionwide debate about management’s attitude toward human rights — seems unlikely.

In fact, several bank employees have shared with Devex their concern about the draft safeguards and what they see as a tendency among bank management to prioritize business over rights. These employees spoke on the condition of anonymity because they were wary of retribution by bank higher-ups who are increasingly seen by colleagues as clamping down on internal criticism — even though Kim has vowed to spend more time listening to staff concerns.

One employee, pointing to the recent exit of top bank officials, said: “There is a culture of fear here, and [pushing out people who disagree] is just another way to keep us quiet.”

A former bank employee who worked as a country officer in Central Asia spoke to Devex about what he perceived as a “lagging interest among my colleagues in the enforcement of safeguards,” and a belief among upper-management that “safeguards are an impediment to lending.”

He recalled a conversation he had in the late 2000s with his then-supervisor to prepare for a U.S. government inquiry into child labor standards in the Central Asian country.

“I wanted to start preparing for the meeting, so I went to see the individual in charge of the project,” the former bank employee said. “She was angry that I came to see her about child labor. She said to me, ‘Children are much better in the field than in school since the quality of education here is so bad.’”

Another bank employee claimed that when she was involved in the bank’s civil society consultations in the early 2000s, “the whole meetings were a farce.” She suggested others at the bank agree there is a “consultation fatigue” and that the meetings are “never seen as an important, educating exercise for us.”

There may be more to that story, of course. Another employee suggested, for instance, that growing discontent among environmental and human rights advocates has led the bank to take consultations more seriously.

“Now they’re scrambling to get civil society on board,” he said.

The bank is more committed than ever to human rights and the environment, Di Leva contended; its commitment to the consultations process, in particular, is proof of that.

“The depth and breadth of civil society engagement, in my personal view, is far greater today than it was in the past,” he said.  

It’s true. According to bank statistics, the number of civil society organizations partnering with the bank has increased from 6,000 in 1990 to more than 70,000 in 2014. Kim is the first president in the World Bank’s history to consult personally with LGBT leaders.

“It’s our responsibility within the scope of the project to make sure that any relevant stakeholder has an opportunity for meaningful consultation and effective participation,” according to Di Leva. “And if there’s someone who wants to participate in the consultation process, and they’re shut out, if they let us know, we can raise that with the government.”

When Devex brought up Di Leva’s points with Sinani, he responded with a barrage of forwarded emails announcing postponed and cancelled consultations. One email subject line read, “CSO denied to be observer at government consultation.”

The email explained that a CSO’s request to sit in on the bank’s consultation with the Belgian government in November was turned down. The bank offered no explanation. The forwarder, a member of an environmental advocacy group, was mystified by the bank’s claim. He wrote, “I checked a few days [ago] with the government: a) they have no objection and b) they were not aware that the meeting was separate.”

When Devex asked Sinani if he thought it was the bank that refused to let the CSO sit in on the consultation, he said, “Possibly. If it was the government that said no, that’s a different story. It might even be expected. But the bank is supposed to help change that relationship with the government.”

Sinani was traveling in Brazil, one of the bank’s next stops this month on its safeguards consultation tour. He said there are no shortage of people worried about the safeguards, but that Brazilians now have bigger concerns at home and with the recent co-founding of the Shanghai-based New Development Bank.

Brazil isn’t alone. The New Development Bank — whose founding members also include Russia, India, China and South Africa — is only one of a growing number of international financing institutions now shopping around for members and clients, and these institutions are hoping to offer both a less Western-dominated framework and greater representation of emerging markets than the World Bank Group. While the BRICS bank and another planned multilateral, the China-led Asian Infrastructure Investment Bank, have yet to formulate environmental and social safeguards, skeptics fear that the bad habits of some member countries will infect the institutions’ safeguards as well.

As the multilateral development bank scene grows more crowded, the revised safeguards could guide the World Bank toward a new role: that of a thought leader, convener and knowledge broker. Aspirational safeguards could become a major success for the bank in that transition — if the bank is indeed able to rally partners and stakeholders around its safeguards model. For that to happen, bank leaders must incentivize high social and environmental standards not only for governments, but for fellow development banks and implementing partners as well.

Alienating civil society, whose input once gave the bank its edge, could mean risking that advantage at a moment when other banks are preparing to step in.

What do you think about the World Bank’s safeguard reforms? How can the bank better engage all stakeholders — including staff, partners and civil society — in the process?

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About the author

  • Molly Anders

    Molly Anders is a former U.K. correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.